Today whole FMCG Sector stocks are down due to Godrej consumer products quarter 3 business update.
The Nifty FMCG index is down around 2 % today and the most tanked stock is Godrej consumer products which was down around 9%.
Godrej consumer gives following updates for Q3 business
The demand conditions in India have been subdued for the past few months which is evident in FMCG market growth. Despite the demand conditions, GCPL has over the past six quarters consistently delivered an average organic UVG of ~7% on the back of category development supported by innovations and media investments.
The surge in palm oil and derivatives prices to the extent of a y-o-y increase of 20-30% has impacted the soaps category, which represents ~1/3rd of our Standalone business revenue. To partly offset the cost increases we have taken price increases, reduced grammage of key packs and reduced various trade schemes. Such pricing actions typically have minimal impact on category consumption but do result in reduced inventory across wholesale and household pantry. Historical patterns indicate a normalization in volume growth following price stabilization, which we anticipate occurring in the next few months.
In parallel but unrelated, the weather conditions have not been supportive (delayed winters in North and cyclone in South India) to the Home Insecticides (HI) segment, contributing ~1/3rd to our Standalone business. This has impacted HI category growths in the current quarter.
Domestic brokerage Emkay Global downgraded Godrej Consumer to a “reduce” rating, from a precious “add” rating, at a target price of Rs 1,225.